In our previous post, we lit the fuse on the concept of how a merger or acquisition may be beneficial when swashbuckling one’s way through the uber-competitive marketing landscape of the present.
By making it this far, you may have decided that this strategy may be prudent -- especially now that you know when and why you might consider M&A for your company. So let’s now take a look at the downside of such an initiative—the “glass-half-empty scenario.”
What are the possible reasons why you would reconsider a merger or acquisition with another organization? Are there cautionary signs of trouble or weakness you should look out for before you sign on the dotted line?
In my experience, there are six primary hurdles that could delay – or derail – an imminent company merger. Knowing which warning signs to look for, and whether the issues recognized can ultimately be conquered, is the difference-maker that will tilt the odds of success in your favor:
But, no matter how much time you spend in the due diligence phase, sometimes you can only glean a rough idea of the value or inventory conveyed in the deal. In this setting, a merger is risky, unless you really have a keen sense and insight for the company, its people, and their products.
Even then, expect a few shallow graves and web-encrusted skeletons to appear, post-acquisition. You can hardly prepare for everything, particularly when a prospective acquisition target desperately wants or needs to be acquired. Most won’t show their dirty laundry – especially if it’s been festering for weeks or even months in the laundry bin.
Unfortunately, inadequate communication between buyers and sellers often results in a fundamental misunderstanding of what the buyer is really buying, and what the seller is really selling. And if the rancher has grossly overestimated the number of cattle in this particular herd – things don’t generally go over too well with the buyer.
Start by assessing the people and processes in both companies. How similarly do they conduct business? What are the differences? Can you discern a path of acceptable execution, or are the people and practices so radically different, that a non-anesthetized root canal would be a more enjoyable undertaking?
In particular, expect product integration or coupling to be difficult. Adding a new feature or product sounds easy enough—but consider the fine details. How much re-engineering will have to take place to offer a well-defined, functionally solid offering to your prospects and customers? Moreover, will the market respond favorably to the new company offerings or positioning, or will it fall back in anger or fear or confusion?
Be certain to take the extra time to plan a path of successful integration before you sign the deal!
The lesson? Some cultures just don’t mesh well with others, and don’t assume it will simply work itself out over time. Dig in deep here, and trust your gut. If the cultures are so diametrically different, you might do well to reconsider the deal.
Sorting through the M&A domino effect with customers and prospects can be daunting, and frequently, it’s the main reason that mergers and acquisitions fail.
Do you have a good idea of how the merger will affect your customers? What about prospects? Suppliers? Have you painstakingly assessed their potential reactions? Can you ensure they’ll embrace the new company -- instead of running for the hills?
No doubt, there is a lot to contemplate, and while a merger can be an extremely positive growth experience for your company, there are serious considerations that must occur before you can be certain you’re up to the task. After all, an acquisition or merger is the gift that keeps on giving…or taking!
Use this six-point list as your final “stress test” – and make sure you’ve carefully examined the fallout – before you proceed to the signing ceremony. As I’ll bet you already know, getting cold feet is a whole lot easier to navigate at the rehearsal dinner than at the wedding reception!
Topics: Mergers & AcquisitionsThu, Mar 17, 2016